Argentina: Kirchner considering throwing the creditors a bone

The Economist has a piece yesterday suggesting that we should expect no resolution soon: Kirchner is enjoying playing the populist, and the IMF and G7 don't have much leverage for now.

Meanwhile, creditors are going round the world (in the US, for example) trying to seize Argentinian state assets where they can find them. Trouble is, I don't reckon there are any, in chucks large enough to make that sort of operation remunerative. We'll see, though.

And, back at the ranch, the talk is of gracious concession: a leaked paper (more here) considers the possibility that the Argies reformulate their Dubai offer, to pay 25% of the total of both capital and interest now due. The orginal offer had been to pay an amount equal to 25% of the capital only.

Funny thing is, the sums don't add up. The piece says that the total capital outstanding is $82bn - the Economist piece uses the number I recognise of $88bn - and the total, including interest, comes to $100bn.

However, my understanding (also backed up by the Economist piece) was that the 25% capital-only payment was the equivalent of 10% of capital-plus-interest. A little light algebra (needs to be!) leads me to conclude that, to reconcile those percentages, the accumulated unpaid interest must represent 150% of the capital. Not 25%.

Finance Minister Roberto Lavagna has been in Berlin talking to opposite number Hans Eichel (speaking for the G7). Lavagna had one or two monkey shines of his own: Eichel told the press that among the German bondholders (to whom 5% of the defaulted debt is due) were many individuals, pensioners, folks who could ill afford the write-off.

Lavagna suggests in response that perhaps the Argentinian payment should be means-tested, with more on the dollar going to small than to large investors!

Nestor Kirchner has plenty of time left for his mini-Peron act to unravel: his is a four year term (expiring in 2007), and he is entitled to run for a second term (Article 90 of the Constitution). That possibility should be acting as some sort of discipline on the conduct of his presidency.

But currently - with the full support of his people, I believe - he's acting with the demob-happiness [2] of an entire regiment.

[Whilst I'm south of the border, worth noting a very useful group blog, Southern Exposure, with despatches from bloggers on the spot in most of those Latin American countries facing the possibility of interesting times in the upcoming year or two - Argentina included, of course.

Meanwhile, distant gringos can only kibitz...]

The attitude in Buenos Aires seems to be, Crisis? What crisis? - the Sun headline of the famous line never said by then UK prime minister James Callaghan, back in January 1979.

Demob happy - demobilisation - survives surprisingly well in British English, given that the War - World War 2 is still (just) the default for this expression - ended nearly sixty years ago, and conscription more than forty.